Price difference of Ready and Under-construction homes lowest ever: Report

By: |
April 26, 2021 2:43 PM

The shrunk price gap works well for end-users as well as investors. End-users can see what they buy and save rent by moving in immediately, while investors focused on steady rentals can start earning right away.

Real estate, commercial real estate, steady fund flows, domestic institutional investors, international institutional investors, office space, IT sector, flexible spaces, manufacturingSluggish demand and high unsold stock in NCR and MMR discouraged hikes in RTM homes prices over the years.

The price gap between ready and ‘off plan’ or under-construction housing has been narrowing y-o-y since 2017 across the top 7 cities.

According to the latest ANAROCK data, the price gap between ready-to-move-in (RTM) and under-construction (UC) homes reduced to a mere 3-5 per cent by Q1 2021. In 2017, the difference between the two categories was anywhere between 9 per cent to 12 per cent across cities, while in 2018 it was 5-8 per cent.

Cities with Lowest and Highest Price Difference in Q1 2021;

NCR (National Capital Region) and MMR (Mumbai Metropolitan Region) recorded the least price difference between RTM and UC homes at 3 per cent. The average prices of RTM homes in NCR were Rs 4,650 per sq. ft. while for UC homes it was Rs 4,500 per sq. ft.; in MMR it stood at Rs 10,700 per sq. ft. and Rs 10,350 per sq. ft. respectively.

Pune, Hyderabad and Chennai have the highest RTM/UC price difference at approx. 5 per cent. In Bengaluru and Kolkata, the difference is just 4 per cent.

The report also states sluggish demand and high unsold stock in NCR and MMR discouraged hikes in RTM homes prices over the years.

“Previously, buyers of under-construction homes had one major advantage,” says Anuj Puri, Chairman, Anarock Property Consultants. He further adds, “Their patience and willingness to court construction risk were rewarded by notably lower prices. However, construction delays and stalled projects had a predictable outcome and risk-aversion set in, with demand tilted heavily towards ready properties. While the fact that RTM homes do not attract GST has been an added attraction, even the price gap between RTM and UC homes has eroded substantially – from 9-12 per cent in 2017 to just 3-5 per cent by Q1 2021.”

Experts say the shrunk price gap works well for end-users as well as investors. End-users can see what they buy and save rent by moving in immediately, while investors focused on steady rentals can start earning right away. The company states in the past four years, developers have been reluctant to increase the prices of ready homes as they need to clear their inventory, hence, ready homes are the ‘in’ thing.

Average Price Difference State wise: Ready-to-move-in and under-construction homes – 2017 vs Q1 2021;

  • The data states that MMR has seen the highest reduction in the gap over the last four years. In 2017, the gap between RTM and UC homes in MMR was 12 per cent – among the highest. Now, in Q1 2021, it has reduced to just 3 per cent – the lowest.
  • According to the report, Bengaluru comes next – in 2017, the price gap between RTM and UC homes was 12 per cent; as of Q1 2021, it has shrunk to 4 per cent.
  • In Pune, the price gap in 2017 also stood at 12 per cent while in Q1 2021, it has reduced to 5 per cent.
  • In NCR, the price gap in 2017 was 9 per cent; as of Q1 2021, it is just 3 per cent.
  • The data also states, in Hyderabad, the price gap was 10 per cent in 2017 while in Q1 2021, it is down to 5 per cent.
  • In Chennai, the price gap in 2017 was 9 per cent; in Q1 2021, it has come down to 5 per cent.
  • In Kolkata, the price gap between the two categories reduced from 10 per cent in 2017 to 4 per cent in Q1 2021.

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